The History of Financial Technology
Like virtually every aspect of modern life, technology has drastically changed finance and how people invest. From dedicated financial technologies, known as FinTech, to the sharing of information in real-time, investing and financial services have never been more accessible and manageable for consumers.
Before the internet, social media, and even 24/7 finance news channels like CNBC, investors had access to very little information about the stock market. Still, that information was rarely available in real-time and was outdated by the time individuals had access to it. At best, investors could read about market developments the next day in the newspapers.
This meant that if you wanted to invest in the stock market, you had to employ the services of a personal financial advisor and go through a trading desk. Those financial services are, and remain, expensive, and the minimum investment required prohibited the average American from entering the stock market in any capacity.
To further complicate matters, it was extremely difficult to educate yourself about finance. Before Google and YouTube gave us the tools to learn about any topic in just a few clicks, textbooks, often outdated, were the only solid resources to self-education consumers had access.
The Early Days of Investing Technology
In the early days of investing, trading was a flurried, opaque, and strictly manual series of processes requiring a physical presence on the floors of banks and stock exchanges. This all began to change with the launch of NASDAQ in 1971, which enabled phone trading for the first time. And yet, without a huge investment account, individuals were still essentially locked out of the stock market.
Since then, financial technologies have advanced dramatically. The internet has given everyone access to endless information and data in the palm of their hand. FinTech platforms have enabled real-time trading for all, no matter how small your investment account is. Finally, social media has provided a wealth of stock market analysis in an easily digestible format (although the credibility of these “finfluencers” is often questionable).
These new FinTech trends incorporate everything from machine learning to artificial intelligence and programmable algorithms, as well as social media itself. Modern technology’s effortless and instantaneous gathering, organizing, disseminating, and connecting of the most useful information has become the individual investor’s greatest ally in the modern investing landscape.
Let’s look at some of the most important innovations in investing technologies and how they have impacted the world of finance, transforming the way novice and expert investors operate in the stock market.
Knowledge is Power
The first question everyone asks when considering investing is, “Where do I begin?” Unless you have a degree in finance, new investors often get stuck on this question and move on. Education about the stock market and investing are still extremely rare in high school and only available to certain majors in college.
Navigating the stock market is often a rapid-fire, split-second decision-making process that requires constant attention to market trends. Without a basic background on how the stock market operates, novice investors often feel completely helpless. This all changed with the internet, particularly with social media and finance technology.
Information is Key
Knowledge is power, particularly when it comes to investing. The more information you have access to, the better decisions you can make. Today, social media has created a never-ending fountain of information and shared knowledge. Ironically, it has solved the problem of information access so dramatically that investors have been presented with the opposite problem – too much information from too many people, and much of that information is questionable at best.
Nowadays, anyone who’s made a little money in the stock market thinks they’re an expert. And anyone who thinks they’re an expert on anything in the social media era feels obligated to share that “expertise” with the world. While some of these experts are sharing valuable, time-tested information, others just got lucky on a few trades and don’t know the difference.
Even simply searching the internet is confusing in the modern era, and deliberately so. A Google search will give you endless results for even the most obscure question, but the top results are manipulated through advertising and sponsorship. Most people don’t understand that, and those top results are not always the most reliable sources of information, just the sources that paid the most to be on top.
This means today’s novice investors are left with a new, even more, perplexing problem – sorting through the swamp of “financial advice” to find the real deal. The more you know, the better equipped you are to make more informed investment decisions to secure your financial future. At the same time, “garbage in, garbage out” is as true with investing as anything else.
What Technology is Used in Finance?
It stands to reason that the more tools an investor has, the more informed decisions he or she can make. Innovations like machine learning, artificial intelligence, algorithms, and big data are crucial to financial technologies. They each play a significant role in bolstering strategies in the financial services industry.
In financial technology, big data extracts historical information regarding how the market reacted under certain circumstances. The data collected is then organized and analyzed by machine learning. As a form of artificial intelligence, machine learning then develops algorithms that can produce patterns that may indicate the future movement of the market. It is a process too complicated to be completed by humans but wildly beneficial for investors. With the indications produced by the data, investors can use technology to make more informed decisions to help strengthen their investment portfolios and financial future.
Technological advancements have certainly upped the game for investing. From the information age of the 1970s through the digital revolution of the 1980s and on to the advanced technological world of today, great gains have been made and continue to disrupt the financial industry.
The result is a collective pool of investors, from beginners to experts, turning to FinTech companies to manage and grow their wealth more effectively and efficiently.
The Stock Market at Your Fingertips
Undoubtedly, the internet is the greatest tool individual investors have. Virtually any existing information is online, just waiting to be consumed and utilized. And it’s not just incomprehensible raw data. Modern algorithms and artificial intelligence are great for dissecting and organizing that information into digestible, relevant knowledge for anyone seeking it.
And it’s hard to avoid. That information is on your laptop, phone, and even on your watch – literally in arms reach at any moment for most of us.
The development of digital applications and mobile banking, particularly apps, has changed the game for investing. With user-friendly, easy-to-download apps, investment management has become so streamlined it’s as easy as a touch of the screen to access and navigate a financial portfolio. This makes things even easier for hobby investors. We can manage our portfolios from bed or in the back of an Uber – anytime we have a few minutes.
But these new technologies still haven’t answered the original question, “Where do I begin?”. In fact, in many ways, technology has further complicated the issue. Without a background in finance, how does the average investor know the difference between a certified financial advisor sharing good advice and their personal trainer recommending a cryptocurrency they’ve never heard of?
Not All Information is Valuable
Social media is full of “stock market gurus,” but their legitimacy is nearly impossible to assess. These influencers’ success is based on views and clicks, not actual financial returns for their followers. Certainly, there is lots of good advice out there. But for every qualified expert on TikTok, there are a hundred sensationalized personalities just creating entertaining content for views.
This brings us back to the original dilemma, without a background in finance or even a basic education, how does the average investor know the difference between the two? Investing is personal. And the beauty of today’s stock market lies in the endless options for strategic moves at a moment’s notice, in real-time, that the internet and modern FinTech have enabled.
Investing Technology in the Social Media Era
Today, more than ever, technology and social networking have provided many opportunities for investors to connect, share advice and tips, and fine-tune their investing strategies. Nobody is more advantaged by technology than the novice investor, now having access to the information that informs sound investment decisions and the kind of advice only available to the 1%.
With all the new fintech companies, stock market forums, Facebook groups, Twitter trends, and now TikTok, social media has created an interactive way for investors to find answers to their questions and meet like-minded people, as well as follow the latest investing trends and news. Technology has enabled new investors of all levels to navigate the market and connect with experts who can manage their portfolios virtually. But one size does not fit all in this case.
But… Where Do I Start?
As we’ve discussed, the problem of access to investing, and the lack of available information, has been solved so effectively by technology that a new problem has arisen. First-time investors are no longer looking for an entry point to investing. Now, they’re left with so many entry points that many are overwhelmed with selecting the right one for them.
Wizest has utilized this technology to create an innovative solution to this new problem. We provide a platform that connects users with qualified, carefully curated, and vetted financial experts. These experts are introduced to users in a way that is accessible and friendly, based on the way we all operate in the era of social media.
Experts create a user-friendly profile that displays not just their credentials but their personalities, their approach to investing, and their current and evolving investment strategies. Users are not assigned an Expert but are given the choice of building a team of Experts they relate to, using a model similar to fantasy football.
Once users find a few Experts they identify with and trust, they can allocate their account however they like. That could mean putting 80% in portfolios created by one Expert and putting the remaining 20% in five additional Experts’ portfolios to see how the portfolios perform. Or, users can spread their account evenly between all of the Experts and slowly narrow down their team over the course of weeks as they assess performance.
With this approach, Wizest removes many barriers historically discouraging Americans from entering the stock market. The responsibility of vetting their advice is no longer on the investor. And the job of analyzing and dissecting the overwhelming stock market data is handled by the pros.
Investing is for Everyone
For most of the history of the stock market, financial services and qualified investing expertise were only available to investors with a huge amount of money to work with. Even today, if you go to your bank and ask for financial advice, these traditional financial services might require a minimum 50k investment. Now those banks are looking to these digital financial services for guidance.
Wizest works more like Netflix than banks and traditional financial institutions. Using a simple subscription model, the cost of this expertise is the equivalent of a coffee a week (between $10-20 per month). Users can start by investing just a couple hundred dollars, with no additional fees for individual trades, and copy their chosen Experts’ portfolios in one click.
Most FinTech apps take one of two approaches: either taking over completely and leaving customers in the dark about how their money is being invested or taking a hands-off approach, giving them the tools to invest without any of the support and analysis they need to make informed financial decisions.
Our users are not burdened by researching individual stocks – the Expert’s job. But they’re never left in the dark about how their money is invested. Each Wizest Expert explains their strategy, and stock picks in your news feed.
Over time, users get a digestible financial education by following their Experts like a social media group. No foreign words or overwhelming charts (the Experts analyze that stuff), just simple play-by-play strategy explanations. After all, the best way to learn about investing is through experience.
The Bottom Line
FinTech innovations have dramatically changed the investing landscape in the modern era, solving some old problems and creating new ones. Finance technology is great, but only when used effectively. With Wizest, we’re harnessing all the power of these existing and emerging technologies to help solve some of those new problems for consumers, remove some risks, and make investing approachable, inviting, and fun for everyone.